Lawsuits from Broadcasters Can’t Keep Disruptive Innovation Away Forever

Earlier this year, a new OTT video service called Aereo appeared poised to do the unthinkable and bring live broadcast TV to viewer’s tablets, smartphones, and PCs for a low monthly fee. Aereo would enable disgruntled cable customers to cut the cord and watch their favorite network sitcoms and sports programming from any connected device of their choosing. Building its business plan on what Aereo considered a technical loophole where it would avoid retransmission fees, the service launched in the NYC market in mid-March with some fanfare and considerable controversy. Local broadcasters sued Aereo before it even launched, and Aereo countersued shortly thereafter.

Aereo’s legal roadblock doesn’t change the fact that consumers want desirable content on any device at any time for a fair price, and now other start-ups are looking for ways to enter the risky yet potentially lucrative live TV OTT market. New entrant Skitter is attempting to capitalize on the popularity of Roku boxes, specifically in target markets where consumers might not have clear over-the-air signals. Although Skitter is not available on mobile devices yet, and it has only been rolled out in the Portland, Oregon market, it is already facing similar broadcaster backlash as Aereo.

According to Multichannel News, Skitter did not obtain permission to carry a Fox signal despite requesting the service from Fox affiliate KPTV, “so Skitter picked up the station under FCC ‘must carry’ rules for no payment.” Aside from KPTV and PBS, Skitter does have retransmission agreements with 8 other Portland broadcast signals available on its Roku app.

Another way that Skitter differentiates from Aereo is that Skitter has ties to the independent telecom industry. Multichannel news explains that “Skitter has a deal with Slayton, Ore.-based Slayton Cooperative Telephone Company, which is planning to offer an IPTV service based on Skitter’s technology. The telco also owns part of Southeast Content Group, the content-licensing arm of Skitter.” DSLreports adds that Skitter appears “to be targeting smaller telcos, who can’t afford building a full TV infrastructure but want to offer subscribers an OTT option.”

Skitter makes for an interesting venture because it appears to be targeting market momentum in both the consumer arena and the carrier arena. Small telcos are struggling with the high cost of video programming, yet in order to compete with larger carriers they almost have no choice but to offer some type of video, even if it is not a profit machine. Skitter, or services like Skitter, might be a “white knight” for small broadband companies who want to focus on offering a fast pipe where consumers can then choose their own suite of content without being forced to buy hundreds of channels they don’t want just to get the ones they do want.

Consumers are increasingly experimenting with video cord-cutting and OTT options, and the more options there are, the more dynamic this market will become. A widely-hyped report this week from research firm NYP Group estimated that average monthly cable bills could hit $200 by 2020, and budget-conscious consumers definitely do not want to hear that right now. In contrast, Skitter and Aereo are available for around $12 per month. Add a broadcast OTT option to a Hulu and Netflix subscription, and you are looking at a grand total of less than $30 per month--but at the sacrifice of premium channels and other speciality programming that is still only available on cable.

GigaOm also points out that “There’s been a lot of chatter within the online video industry about the possibility of a so-called virtual operator—a company that offers you a TV subscription that is entirely delivered over the Internet, and at a much smaller price than your typical cable package. It’s an interesting proposition to cord cutters who don’t want to bother with an antenna to receive over-the-air programming, or can’t get any signal with an antenna.” GigaOm continues, “But this is about more than just convenience: A virtual operator that has access to basic broadcast channels also has a huge potential for disruption, because it could become a Launchpad for new life television networks that aren’t exclusively tied to cable.”

Skitter, Aereo, and all those live TV OTT dreamers out there have a wide open market in which to experiment right now—except for the fact that broadcasters are going to fight their every move. Nobody ever said that disruptive innovation was easy--especially when it is trying to disrupt one of the most entrenched industries in the country.